Monday, September 16, 2013

Seeking Alpha: AEIS Offering A Semi Rebound And A Long-Term Solar Kicker

There are two ways you can look at Advanced Energy Industries (AEIS) - it's an up-and-coming leader in solar power inverters with a cyclical semiconductor equipment business attached, or it's a leading supplier of power conversion and thermal instrumentation products to the semiconductor industry with a growing (but intermittently profitable) solar business attached. Either way, I believe AEIS is still an undervalued tech stock with a clean balance sheet and multiple potential growth drivers in the coming years.

Please read more here:
AEIS Offering A Semi Rebound And A Long-Term Solar Kicker

Seeking Alpha: CCL Industries On A Path Toward Printing Cash Flow

Like it's smaller American cousin Multi-Color (LABL), CCL Industries (CCDBF.PK) is a company whose products are in front of readers' eyes every day, and yet go largely unnoticed. You would never buy a bottle of shampoo or beer that had no label on it, and likewise all manner of companies in consumer goods, healthcare, chemicals, and so on require labels for their products.

That has created a global market worth an estimated $30 billion a year, with close to one-third of that in North America. Through organic growth, helped by the development of more advanced label-making capabilities, and acquisitions, CCL Industries has emerged as the leader in the industry. In this case, though, "leader" still means less than double-digit share, and CCL Industries not only has the opportunity to benefit from acquisition-related synergies, but also further utilize its balance sheet to consolidate a slow-growing but essential industry.

Continue reading here:
CCL Industries On A Path Toward Printing Cash Flow

Sunday, September 15, 2013

MassDevice: Once More Unto The Breach With Intuitive Surgical

The stock market is a funny place, and it's not all that uncommon for an analyst or investor to find himself defending a company/stock he once was not all that interested in owning. That's where I'm at these days with Intuitive Surgical (NSDQ:ISRG), as although I'm accustomed by habit to lamenting Wall Street's excessive enthusiasm for the company and the "everything is awesome" blue-sky feedback from docs during due diligence calls, sentiment has shifted quite a bit over the past few months.

Please read more here:
http://www.massdevice.com/blogs/massdevice/once-more-unto-breach-with-intuitive-surgical

The Motley Fool: Johnson & Johnson Looks To Turn The Fading Ortho Diagnostics Unit Into Cash

While Foolish readers know all too well that a good turnaround story can drive excellent shareholders, sometimes discretion is the better part of valor and it makes more sense to just get out and move on. That is the attitude of Johnson & Johnson (NYSE: JNJ  )  with respect to its Ortho Clinical Diagnostics, or OCD, business, with the company openly acknowledging that it has begun discussions to sell this long-underperforming unit.

Continue here for the full article:
http://www.fool.com/investing/general/2013/09/12/johnson-johnson-looks-to-turn-the-fading-ortho-dia.aspx

Seeking Alpha: Waiting For The Next Pullback At FEI Company

Writing about FEI Company (FEIC) is a mixed blessing in some respects. While I really like what this leading microscopy company is doing, the nearly 400% appreciation in the stock over the past three years easily lends itself to "If you're so smart, why didn't you own it?" catcalls from the peanut gallery.

Putting that aside, I continue to be very bullish on the company's business prospects in the coming years. Not only is the company rolling new products with enhanced capabilities that could significant expand its addressable revenue potential, but management isn't losing sight of its operating responsibilities in the pursuit of more growth. Although FEI Company is more cyclical than some investors may like from a growth company and it doesn't look particularly cheap at first glance, this is a stock that I'd keep an eye on in the hopes of adding shares on a pullback.

Please continue here:
Waiting For The Next Pullback At FEI Company

Friday, September 13, 2013

Seeking Alpha: Entegris Is Another Small-Cap Play On Future Semi Spending

Investors aren't exactly in danger of running out of ways to play expected improvements in semiconductor capital spending in 2014. I've already talked about opportunities in companies like Ultratech (UTEK) and Mattson (MTSN), and both appear to offer significant value if and when next-gen capital spending increases.

Entegris (ENTG) is a different sort of play. Unlike Ultratech and Mattson, there really isn't much of a missionary aspect to sales - semiconductor manufacturers already understand the need for contamination control and advanced material handling, and Entegris already holds solid share in its core markets. That said, more advanced fab processes should require more filtration equipment and a larger sales opportunity for Entegris. While I don't necessarily see as much upside in the Entegris bull-case scenario (compared to Ultratech or Mattson, that is), I believe there is less execution risk here and still an opportunity to generate worthwhile capital gains.

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Entegris Is Another Small-Cap Play On Future Semi Spending

Seeking Alpha: Graham Corp Already Seems To Be Building In Better Days

Investors have seen multiple examples recently that demonstrate how quality industrial companies can bring in buyout offers at valuations above what I believe most analysts would calculate as fair on a stand-alone basis. Over the past three months, Gardner Denver, Edwards Group (EVAC), and Kaydon (KDN) have all accepted deals that I believe fit that pattern.

That brings me to Graham Corp (GHM). I love the idea of a company that holds strong market share in engineered-to-order ejectors, condensers, heat exchangers, and pumps, not to mention one that produces good returns on invested capital without overwhelming institutional ownership. On the other hand, shares are up more than 80% over the past year and it's tough to find a metric under which the shares are cheap. With that, I believe these shares are already baking in some degree of takeout premium, though I intend to keep it on the watchlist in case it sells off at some point.

Please read the full article here:
Graham Corp Already Seems To Be Building In Better Days

Wednesday, September 11, 2013

Seeking Alpha: Just How Far Can International Markets Take Wabtec?

Wabtec (WAB) is one of those uncommonly well-run industrial companies that just does not provide an investor with many opportunities to "buy the dip". Yes, there have been pullbacks along the way of 25% or so, but the company seldom looks cheap on conventional metrics.

On the other hand, here's a company with strong share in about 50% of its business, and a long record of generating high single-digit or double-digit revenue growth and improved operating margins in a cyclical industry. Although I don't want to get carried away with this bull market and a stock that is already up more than 50% over the past year, the argument for a fair value in the $70's doesn't seem ridiculous if you believe the company can replicate its success in North America in other parts of the world.

Please read more here:
Just How Far Can International Markets Take Wabtec?

Seeking Alpha: Hollysys Automation Still Good, Just Not As Cheap

I last wrote about HollySys Automation (HOLI) on December 18, 2012 ("HollySys Looks Like A Name To Watch..."), saying at the time that I thought it was a very interesting (and undervalued) company in the Chinese industrial automation and trail/subway control markets. Since then, the shares have risen about 34% - doubling the return of the S&P 500, and doing considerably better than other players in automation and mass transit like Siemens (SI) (up 5%), ABB (ABB) (up 10%), Emerson (EMR) (up 20%), Invensys (up 22%), Rockwell (ROK) (up about 23%), and even Honeywell (HON) (up about 32%).

Certainly plenty has happened over the past nine months, including ongoing struggles in the Chinese industrial automation market and delays in rail and subway projects. Along the way, HollySys also spent about $73 million on an acquisition in Singapore/Malaysia, and continued to make progress with its automation portfolio. I no longer see HollySys as a table-pounding buy, but I'd suggest current owners hang on and non-owners keep this one on their watch list.

Please read the full article here:
Hollysys Automation Still Good, Just Not As Cheap

Seeking Alpha: The Street Still Doubts Gamesa Has A Business For The Long Term

Retail investors always react angrily whenever you mention it, but even the hottest markets always come back to real-world concerns like economic value added, margins, and cash flows. Nobody wanted to hear about the per-kWH costs of wind power or the importance of government subsidies back in the glory days of the renewable/alt energy bubble, but the chickens ultimately came home to roost (as they always do), and they left a big mess on former high-fliers like Vestas (VWDRY.PK) and Gamesa (GCTAY.PK) (GAM.MC).

Extreme industry over-capacity and order declines tied to lower government subsidy payments have forced turbine manufacturers to restructure their operations and rein in their ambitions. To that end, I think Gamesa has made a lot of progress, progress that shows in the 220% jump in the share price over the last year and the more than 450% appreciation from the worst of the lows. While Gamesa still has to deal with well-heeled rivals like General Electric (GE) and Siemens (SI) and a host of low-cost Chinese rivals, I think Gamesa's stable turbine market share is an underrated positive in this story, and it looks like the market still doesn't quite believe that this is a viable story for the long-haul.

Read the full Seeking Alpha article here:
The Street Still Doubts Gamesa Has A Business For The Long Term

Seeking Alpha: Can Orbital Sciences Be More Than Just A Good Idea?

If you want to be uncharitable, you could say that Orbital Sciences (ORB) is a company with a great future in its past. Going beyond the "gee whiz" factor of a company that builds launch vehicles and space systems, this is a company that has shown generally solid progress in revenue growth over the years but has struggled to show consistent free cash flow production or stock price appreciation.

Orbital could be looking at a period where results turn up, though. The commercial satellite business should benefit from a cyclical upswing in orders, and the company's participation in NASA programs tied to the International Space Station (ISS) should begin to pay off in the coming five years. Underlying that is a relatively stable business built around missile defense and military and research satellites. There will always be risks tied to government budgeting priorities and spectacular operating failures, but I can sympathize with investors taking a "it's different this time" approach to Orbital Sciences.

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Can Orbital Sciences Be More Than Just A Good Idea?

Tuesday, September 10, 2013

Seeking Alpha: Should Investors Go With The Flow?

If you follow the earnings reports of machine tool companies like Hurco (HURC), Hardinge (HDNG), and Gildemeister, these are not happy-fun-times in the machine tool industry, though there seems to be a big difference between companies that address high-volume and low-volume markets (the smaller the target company, the worse things appear to be). Likewise, companies with big exposure to metal-cutting, including Kennametal (KMT), Atlas Copco (ATLKY.PK), and MSC Industrial (MSM), have been reporting pretty challenging market conditions in North America and Europe.

As Flow International (FLOW) sells metal-cutting machine tools, you can probably guess where this is going. While Flow is a leader in waterjet cutting equipment, a business that seems under-penetrated, weak capex demand in the U.S. has made it difficult for this company to make real headway. I do believe there may be a worthwhile opportunity in these shares, but investors considering them are going to need patience (and maybe a buyout) to see this story work out.

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Should Investors Go With The Flow?

Transactions

BOT: Lundbeck (LUN.CO)

Seeking Alpha: Palo Alto Networks Trying To Win Back Wall Street's Love

It's so common as to be practically cliché - a young tech company with disruptive technology comes out as a hot stock, gets sell-side analysts racing to put out ever-higher targets, stumbles, and then has to spend some time in the penalty box before it wins back institutional investor love. We can argue about the extent to which Palo Alto Networks (PANW) has followed exactly that pattern, but I think the relative performance of "new security" firms like Palo Alto and Fortinet (FTNT) is pretty striking relative to "old security" firms like Check Point Software (CHKP).

I've long been a die-hard supporter of Check Point Software, but I'm actually wondering whether Palo Alto may be the better buy for the time being. True, the company does have to deal with litigation brought against it by Juniper (JNPR), and that may lead some investors to step aside pending a resolution. Likewise, the recovery in IT spending that seems to be emerging could go away with little warning. Even so, I think Palo Alto has a meaningfully better mousetrap in enterprise security and I think the shares may be undervalued to a worthwhile extent today.

Please follow this link for the full article on Seeking Alpha:
Palo Alto Networks Trying To Win Back Wall Street's Love

Seeking Alpha: HD Supply An Expensive Play On Construction And MRO

Admittedly, I have a thing for the industrial/MRO distribution sector - I own MSC Industrial (MSM) and follow others like Fastenal (FAST), Grainger (GWW), and WESCO (WCC) pretty closely. Although it's a very competitive space with a strong cyclical component, it's a fragmented market where companies with a good business plan (e.g. MSC Industrial and Fastenal) can really make a name for themselves.

Into this mix comes one of the bigger dogs in the yard - HD Supply (HDS). Once part of Home Depot (HD) and then sold to private equity, HD Supply has already enjoyed a pretty good post-IPO run, rising about one-third since its debut. Although I do appreciate the leverage that HD Supply offers to a U.S. construction rebound, not to mention margin improvement and consolidation potential, I think the multiple today is demanding unless you are really bullish on the company's growth plans and the recovery potential of the U.S. construction market.

Please read more here:
HD Supply An Expensive Play On Construction And MRO

Seeking Alpha: A More Focused Sulzer Should Be A Better Sulzer

Leading pump manufacturer Sulzer (SULZF.PK) (SUN.VX) hasn't been on the best run of late. Relative to fellow pump players Flowserve (FLS) and Weir Group (WEIGY.PK), Sulzer's performance over the past year (up about 4%) has been pretty poor, due in very large part to a huge miss with second quarter earnings and a three-day fall of nearly 20%.

Admittedly, the company's guidance for fiscal 2013 isn't exciting - sales and order growth in the low single digits - and Sulzer's margins and returns on invested capital have been stepping lower since 2008. That said, this company has 20% to 50% share in its core pump markets and a decision to refocus around its pump and fluid control businesses in markets like oil/gas, power, and water should lead to improved results down the line. Buying Sulzer today is a contrarian move, and a bet on improved operating performance, but one that I don't think is unreasonable given the company's past performance and future potential.

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A More Focused Sulzer Should Be A Better Sulzer

Seeking Alpha: Neurocrine Takes Strike 2 On VMAT2

Right up until today, Neurocrine (NBIX) had been a pretty strong call for me. I last wrote about this biotech for Seeking Alpha on September 18 ("Neurocrine Still Looks Significantly Underrated"), and the stock had been up more than 100% since then. While making money in biotechs has hardly been difficult over the last year, a lot of optimism had been building around both Neurocrine's endometriosis and fibroid treatment Elagolix (being developed under license by AbbVie (ABBV)) and its VMAT2 inhibitor ('854) for tardive dyskenesia (TD).

That all came to a screeching halt when Neurocrine announced yet another Phase II trial failure for '854 in TD. Although the KINECT-1 study may not be technically a failure, as the 100mg arm showed a statistically significant impact at two weeks, the 50mg arm failed, there were more than a few odds aspects to the study, and the company is going back to the Phase II drawing board to design another study.

While I do remain bullish on Neurocrine on balance, I would suggest investors ignore those who try to look past this setback with some version of "VMAT2 doesn't matter, it's all about Elagolix". The market potential for Elagolix is hardly guaranteed and the company's troubles with getting '854 through the clinic have me more than a little concerned.

Please read more here:
Neurocrine Takes Strike 2 On VMAT2

Monday, September 9, 2013

Catching up on transactions

Have fallen behind updating my transactions (though my portfolio page is always up to date).

So, without further ado -

BOT: Broadcom, Lenovo, Manitex, Ultratech
SOLD: AES, America Movil, Tower Group

Seeking Alpha: The Strange Story At Nam Tai Will Go On

I have fond memories of Nam Tai Electronics (NTE), as the shares did very well for me from late 2002 to early 2003 when the company was still an assembler of "knock-down" cell phone kits. I do like to occasionally check in on past winners, and while Nam Tai was a little "different" even then, the company has chosen to go in a radically different direction.

With apparently only limited desire to continue competing in the electronic manufacturing/assembly space, Nam Tai is basically running off its liquid crystal display module (LCM) assembly business and putting its eggs in the real estate development basket. While Nam Tai's real estate assets likely do have meaningful value, the company's apparent preference to develop rather than sell means investors could be looking at a long wait before recognizing that value, let alone dealing with the vagaries of the Chinese real estate market.


Click here to continue to the full piece:
The Strange Story At Nam Tai Will Go On

The Motley Fool: Should Johnson & Johnson Be Looking For A Cougar In Devices?

Several years ago, Johnson & Johnson (NYSE: JNJ  ) realized it had a problem with its drug business. This wasn't a particularly poignant revelation, as the struggles of the business from around 2004 to 2010 were pretty easy to see, but the company went and did something about it. Licensing agreements with Bayer and Mitsubishi Tanabe brought in drugs like Xarelto and Invokana, while the billion-dollar acquisition of Cougar Biotechnology ultimately turned into the blockbuster prostate cancer drug Zytiga.

I mention this because other parts of J&J could use some TLC. Not only is the consumer/over-the-counter business still on a slow path to recovery from repeated product quality and recall issues, but the device business has turned into a perpetual disappointment with low organic sales growth. While the large acquisition of Synthes (announced in 2011, completed in 2012) has spiffed up the orthopedics business, I think it's worth asking whether Johnson & Johnson should think about going Cougar-hunting in the device space.

Please read the full article at The Motley Fool:
http://www.fool.com/investing/general/2013/09/09/should-johnson-johnson-be-looking-for-a-cougar-in.aspx

Seeking Alpha: Monotype Imaging May Be On Hold For 2013, But The Long-Term Outlook Is Solid

Given that Monotype Imaging (TYPE) is up about 16% since I recommended it in mid-March (against 6% for the S&P 500), I'm feeling pretty good about that call. Likewise, I still like the long-term opportunity for this company. Fonts and typefaces are one of those businesses that fits in with Peter Lynch's philosophy of targeting overlooked businesses that provide essential products/services that nobody thinks about much, if ever.

All told, I still believe that Monotype has less than 20% of its potential market, and the revenue opportunity for the company could be as high as $1 billion. On the other hand, demand for consumer and business electronics like handsets, tablets, and printers has been softer lately and the company has had to reduce guidance on the basis of higher/worse-than-expected FX headwinds and taxes. I don't believe that investors need to freak out over the lower guidance for 2013, but it does suggest that these shares may be just marking time until revenue growth reaccelerates.

Please continue here:
Monotype Imaging May Be On Hold For 2013, But The Long-Term Outlook Is Solid

Seeking Alpha: Gazprom's Discount Seems Extreme

I can understand why investors may not be elbowing each other aside to buy shares of Gazprom (OGZPY.PK). Gazprom is controlled by the Russian government, and while it is a major source of Europe's natural gas supplies, Western oil and gas companies are hard at work boosting production in areas like the North Sea to reduce that dependence. It also doesn't help matters that Gazprom reports financial results on "Russian time", with March quarterly IFRS results only just reported in the first week of September.

And yet, we're talking about a company that produces 17% of the world's natural gas and holds a similar percentage of the world's natural gas reserves. We're talking about a company that literally monopolizes Russia's gas exports and represents a major source of energy to Europe. We're also talking about a company that will likely begin exporting natural gas to China in the future, and could ultimately supply even more of the world's gas needs.

Trading at approximately 2.6x 2014 EBTIDA estimates, Gazprom's valuation seems to already incorporate some rather sizable doubts about the company's ability to improve domestic pricing, control production costs, and support rising dividend payouts. While Gazprom shares are not appropriately for investors with low appetite for risk, the shares do seem undervalued even by the stressed standards of Russian energy companies and offer more than 40% upside from today's levels.

Read the full article here:
Gazprom's Discount Seems Extreme

Seeking Alpha: AudioCodes May Need A Breather, But The Company's Making Progress

For all of the companies that talk about restructuring and refocusing and go nowhere with it, some do turn a corner and start delivering improved financials. I think AudioCodes (AUDC) belongs in that second box, as the company's efforts to refocus itself around enterprise VoIP, and Microsoft's (MSFT) Lync in particular, have already started to pay dividends.

The shares are already up more than 250% from last year and well off the sub-$1.50 lows. Even so, the company still has low institutional ownership and minimal sell-side support. As I believe that smaller enterprises will start pushing money-saving SIP trunking and unified communications up the list of spending priorities, I think AudioCodes has a good market opportunity ahead of it. While my base-case assumptions don't suggest huge cash flow-based upside at this point, I won't be that surprised to see AudioCodes outperform over the next few quarters and support even stronger long-term projections (and a higher fair value).

Please follow this link to read the full article:
AudioCodes May Need A Breather, But The Company's Making Progress

Seeking Alpha: From Russia With No Love, Lukoil Trading At A Very Low Multiple

It's easy to come up with good reasons to steer clear of Russian equities. The Russian government has shown itself perfectly willing to play fast and loose with the rule of law, corruption is still an endemic problem, and the notion of shareholder rights can be pretty iffy.

Even so, I find that some of best investment returns have come from places where the "conventional thinking" was much too bearish, and so I think it may be with Russia and its second-largest oil producer Lukoil (LUKOY.PK). Although Lukoil does need to bring new fields into production to offset declines in its Western Siberia fields, those developments are underway and the company could surprise to the upside with long-term oil production. With only a 3.5x multiple to 2014 EBITDA supporting a price target 30% above today's price and a 5%+ dividend, Lukoil appears to be meaningfully undervalued even relative to the "Russia discount".

Please read more here:
From Russia With No Love, Lukoil Trading At A Very Low Multiple

Friday, September 6, 2013

The Motley Fool: Cooper Leveraging Share Gains For Eye Opening Growth

Cooper (NYSE: COO  ) , or more formally "The Cooper Companies" is a sort of odd duck in the med-tech world. It's fairly well-respected by eye care rivals like Johnson & Johnson (NYSE: JNJ  ) and Novartis (NYSE: NVS  ) ; it has done well in the market (up more than 280% over five years and about 55% over the past 12 months); and it's well-followed and well-owned on the Street.
Even so, it doesn't generate much pizzazz with individual investors, and there's not much coverage of it out there. Some of that may be due to valuation -- as Cooper rarely trades at a multiple I'd call cheap -- but this is a story likely to feature strong market share gains and meaningful margin/free cash flow leverage, and those tend to be the stocks that outperform.

Please read more of this article at The Motley Fool:
http://www.fool.com/investing/general/2013/09/06/cooper-leveraging-share-gains-for-eye-opening-grow.aspx

Seeking Alpha: Layne Christensen Still Clear As Mud

Layne Christensen (LAYN) has never been an easy stock, and a variety of problems in recent years hasn't made things any easier. This was always an unusual resources conglomerate, with operations in water, minerals, and energy, but a corruption scandal, downturns in the market, and an inefficient corporate structure have made the situation even more challenging. Though I can see a viewpoint whereby these shares may be undervalued, I think the company is looking at some challenging end market conditions and a lot of internal heavy lifting - Layne Christensen is, I believe, getting better, but it's operating environment is getting worse.

Please read the full article here:
Layne Christensen Still Clear As Mud

Seeking Alpha: Hurco Disappoints Amidst A Murky Machine Tools Market

There's an old NFL Films clip of Vince Lombardi fuming along the sidelines and yelling out "What the 's goin' on out here?" That encapsulates my feelings about the machine tool market and Hurco's (HURC) place within it. Hurco's limited focus on short-run, high-spec systems reduces the comparability to larger firms like Gildemeister, Mori Seiki (MRSKY.PK), Okuma (OKUMF.PK), and Makino Milling (MKMLF.PK), but it's still frustrating to see the company fail to make progress with its revenue, margins, and order flow.

Please read the full Seeking Alpha article here:
Hurco Disappoints Amidst A Murky Machine Tools Market

Seeking Alpha: Wall Street Too Eager To Believe In VeriFone's Turnaround

I have thought for some time now that Wall Street badly wants to believe that VeriFone (PAY) can turn around its business, and the reaction to the company's third quarter earnings backs that up. VeriFone went out of its way to lower the hurdle for this quarter - to a point where a gopher could clear it - but pre-market indications on the stock seem to suggest that this was a meaningful beat for the company. Suffice it to say, I'm not a VeriFone bull. I believe the right CEO hire could make a real difference here, but even a 10% growth estimate doesn't point to much value.

Please click this link for the full article at Seeking Alpha:
Wall Street Too Eager To Believe In VeriFone's Turnaround

Thursday, September 5, 2013

Seeking Alpha: Two Valuable Lessons From Kaydon's Sale To SKF

I wrote on bearings and velocity control products company Kaydon (KDN) in early March of this year, and I didn't see a lot of value at the time. As the year went on, that call looked worse and worse, as the stock climbed about 18% - well above the S&P 500, and well above industry peers/competitors like Timken (TKR) and SKF (SKFRY.PK). To top it all off, Kaydon announced this morning (September 5) that it had received and accepted a buyout offer from SKF valuing the company at $35.50 - some 45% higher than the price when I thought it looked only about 10% undervalued. So what did I get wrong here, and what can investors do to avoid a similar mistake?

Please follow this link to continue:
Two Valuable Lessons From Kaydon's Sale To SKF

Seeking Alpha: Titan Machinery - Is This Roll-Up Rolling Over?

I've had my doubts about Titan Machinery (TITN) for a while now, as I've seen more than a few debt-funded equipment dealership roll-up stories in the past, and they often don't end well. To that end, the last year and two years have been pretty dicey for buy-and-hold investors, as concerns about the health of the agricultural equipment market and the potential for a rebound in construction equipment demand weigh on sentiment.

As it stands today, I have very mixed feelings about this business. I do have some concerns about the health of the ag equipment sector in the coming years, and I have real doubts about Titan's ability to leverage CNH Global (CNH) construction equipment into a viable construction equipment dealership business. On the other hand, it seems harsh to say that the company creates no value at all, and it trades only about 5% above tangible book value. I'd rather play a bullish (or bullish relative to consensus) call on agriculture and/or construction through names like Deere (DE), Caterpillar (CAT), Kubota (KUBTY.PK), or Komatsu (KMTUY.PK), but Titan's underperformance makes it hard to be loudly bearish on the name.

Please follow this link to continue:
Titan Machinery - Is This Roll-Up Rolling Over?

Seeking Alpha: Improving Housing And A Major Deal Make Louisiana-Pacific Much More Interesting

The housing recovery trade seems to have hit a bit of a snag recently, as even hot trades like Home Depot (HD) and Mohawk (MHK) have cooled a bit recently. With mortgage rates heading higher and new construction activity still not that strong relatively to long-term averages, timber, lumber, and wood products companies have gotten dinged. While I had already been planning to write on Louisiana-Pacific (LPX) and point out that it seemed as though the market was pricing in too much skepticism about the OSB, siding, and engineered wood markets, the company did a deal that only makes the story more interesting.

In buying Canada's Ainsworth Lumber (ANSBF.OB), Louisiana-Pacific is not only adding capacity ahead of increased demand, but it is also improving its sales/margin mix, adding an Asian export business, and perhaps helping to quell fears that the industry will act irresponsibly with respect to capacity restarts/additions. While I'm actually surprised at how undervalued Louisiana-Pacific appears to be, it looks like there could be room here for 20% to 40% appreciation even after the strong positive reaction to the Ainsworth deal.

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Improving Housing And A Major Deal Make Louisiana-Pacific Much More Interesting

Seeking Alpha: The Wait Goes On For NCI Building Systems

Investors waiting for the recovery in non-residential construction are still waiting, and that's not good news for NCI Building Systems (NCS). Although this company has attractive market share leadership in metal coating, building components, and engineered building systems, that leadership isn't worth as much in a construction market that has struggled to lift off the bottom. There does appear to be value in these shares, but the timing of that non-residential building recovery is a major unknown right now.

Please continue here:
The Wait Goes On For NCI Building Systems

Wednesday, September 4, 2013

Seeking Alpha: Home Is Where The Bard Is

Patient, if not long-suffering, shareholders in Rochester Medical (ROCM) finally got their vindication on Wednesday, as Bard (BCR) stepped up with an all-cash offer for this largely home-care focused urology devices company. Although this deal is not going to radically change the growth outlook for Bard, it is a logical buy-vs-build move that should add long-term value and give the company entry into a market that should be poised for growth in the coming years.

Please continue here:
Home Is Where The Bard Is

Seeking Alpha: Amidst Rate And Commodity Worries, Oneok Partners Looks Interesting

Master limited partnerships (MLPs) aren't like most stocks. You don't generally buy these stock (technically, units) for multi-bagger appreciation potential, but rather for meaningful distributions (dividends) that also typically come with significant tax advantages. While I don't suggest that ONEOK Partners, L.P. (OKS) is one of those aforementioned multi-baggers, I do believe the shares are at least 20% undervalued today. What's more, the company's sizable natural gas and natural gas liquids capacity is tough to match, and multiple ongoing growth projects should lead to greater distributions down the road.

Please read the full article here:
Amidst Rate And Commodity Worries, Oneok Partners Looks Interesting

Seeking Alpha: Patient Investors Get A Crack At Plum Creek Timber

Timberland investing has become one of the more popular "open secrets" of institutional investing - numerous papers have been published comparing the long-term value and performance of investments in timberland to other asset classes, and timberland has often come out looking quite good. Not surprisingly, that has led to institutional dollars flowing into the asset class, leading to quite a bit of volatility in the price (or value) per acre of this class of real estate.

While investing in timberland itself is not very easy for the average investor, REITs like Plum Creek Timber (PCL) offer an appealing alternative. While Plum Creek (and comparables including Weyerhaeuser (WY), Rayonier (RYN), Deltic (DEL), and Potlatch (PCH)) are not pure plays on timber (many of them produce wood-based products and/or sell off lands for real estate development), they're as close as most investors will find, and the popularity of timber as an asset class has generally kept these shares well-valued.

Financial writers often talk about "waiting for a pullback" before buying a stock, and Plum Creek looks like it's offering just that sort of opportunity. With U.S. housing and real estate on the mend (albeit slowly), more lumber going to China, and new opportunities for wood like fuel pellets, Plum Creek's long-term value looks solid. Even so, the shares are down sharply from the May 2013 high and flat for the year. Assigning an objective fair value to Plum Creek may be like nailing Jell-O to a tree, but I would argue that the shares are worth at least $54 today which, in combination with a nearly 4% dividend yield, makes this a stock worth consideration today.

Please follow this link to continue:
Patient Investors Get A Crack At Plum Creek Timber

Investopedia: Ciena On A Roll With Carrier Spending Picking Up

It looks like the good times have arrived for Ciena (Nasdaq:CIEN), as this optical telecom equipment company delivered another beat-and-raise quarter with its fiscal third quarter results. Although carrier spending is not uniformly strong, Ciena shares could move higher as telcos loosen up their purse strings and move forward with badly needed capacity upgrades.

Please read more here:
http://www.investopedia.com/stock-analysis/090413/ciena-roll-carrier-spending-picking-cien-csco-vz-cyni.aspx

Investopedia: Gerdau Seeing Brazil Get Better, But U.S. Ops Are Struggling

The wait for the turnaround in the steel industry has been a challenging one for shareholders. While some companies, including U.S. minimill operators Steel Dynamics (Nasdaq:STLD) and Nucor (NYSE:NUE) and foreign producers like Ternium (NYSE:TX) have seen their shares turn around, other steelmakers like ArcelorMittal (NYSE:MT), U.S. Steel (NYSE:X), and Gerdau (NYSE:GGB) have had a rougher go of it.

Sentiment seems to be turning around for Brazil-based Gerdau. Steel companies there are having more success in pushing through higher prices and demand has been pretty solid from customers in autos, aviation, and other types of heavy industry. What's interesting, though, is that sell-side enthusiasm isn't really reflected in their estimates, and Gerdau doesn't look all that cheap on a near-term numbers basis. While improving conditions in Brazil and a pick-up in the U.S. could definitely lead to upward estimate revisions, the bull case does require investors to look out beyond just the next 12 to 18 months of EBITDA.

Please follow this link to the full article:
http://www.investopedia.com/stock-analysis/090413/gerdau-seeing-brazil-get-better-us-ops-are-struggling-ggb-mt-nue-stld.aspx

Investopedia: Arch Capital Is Excellent, But No Bargain

It feels as though it was a very long time ago when Arch Capital (Nasdaq:ACGL) last traded at a meaningful discount to fair value. But then, that's the price of excellence – there are few insurance management teams I'd rather invest with and the market is not shy about rewarding the shares for the skill of the team here. While there's always a chance that an active storm season could create an investment opportunity in Arch Capital, investors shouldn't this stock to offer many opportunities to buy at significant discounts to fair value.

Please follow this link to continue:
http://www.investopedia.com/stock-analysis/090413/arch-capital-excellent-no-bargain-acgl-brka-ace-rnr.aspx

Investopedia: Coca-Cola FEMSA Adds More Volume In Brazil

Coca-Cola FEMSA (NYSE:KOF), the second-largest Coca-Cola (NYSE:KO) bottler in the world and owned by both Coca-Cola and FEMSA (NYSE: FMX), continues to show a willingness to invest for future growth and margin leverage. KOF has spent roughly $6 billion over the last two years, including nearly $700 million to expanding into the Philippines. Now KOF has added some significant assets in Brazil with the $1.9 billion acquisition of Spaipa, the second-largest private Coca-Cola bottler in Brazil.

Continue reading here:
http://www.investopedia.com/stock-analysis/090413/cocacola-femsa-adds-more-volume-brazil-kof-fmx-ko-akob.aspx

Investopedia: Nokia Sells Its Handset Business To Microsoft And Remakes Its Future

From virtually the day that Nokia (NYSE:NOK) and Microsoft (Nasdaq:MSFT) began working together on mobile handsets and smartphones investors have speculated whether Microsoft would acquire Nokia's handset business. Not only had Nokia continued to struggle with the transition to smartphones, some argued that Microsoft would want to “control its ecosystem” in the same way that Apple (Nasdaq: AAPL) and Google (Nasdaq: GOOG) do through their software and hardware operations.

That all came home to roost on Tuesday, as the two companies announced a transformative deal that will see Microsoft acquire Nokia's phone business and license significant intellectual property (IP). After the deal, Nokia will be a cash-rich wireless infrastructure company, while Microsoft will be much more geared towards handsets and consumer devices.

Please continue here:
http://www.investopedia.com/stock-analysis/090413/nokia-sells-its-handset-business-microsoft-and-remakes-its-future-msft-nok-aapl-goog.aspx

Tuesday, September 3, 2013

Investopedia: Tata Motors - A Tale Of Two Businesses

Tata Motors (NYSE:TTM) is arguably one of the best-known Indian companies, due in no small part to the fact that it is was among the first Indian companies to list on a U.S. exchange. What's more, analysts and investors have long been excited by the potential of selling cars and trucks to such a large and growing economy.

While that all sounds good, the year-to-year reality has been more challenging. Due in part to poor designs, questionable customer experiences, and inefficient infrastructure, Tata has had considerable challenges in its domestic passenger vehicle business, while the commercial vehicle business has struggled in the face of tougher economic conditions. That leaves the company even more dependent upon Jaguar Land Rover – a growing luxury brand with good exposure to China as well as recovering markets in North America and Europe. Many of the metrics for Tata Motors suggest undervaluation, but a long-term cash flow analysis suggests that investors may still be expecting more than this company can deliver for the long term.

Please read more here:
http://www.investopedia.com/stock-analysis/090313/tata-motors-tale-two-businesses-ttm-f-cmi-bamxy.aspx

Investopedia: A Great Model And Growing Markets Powering Copa Holdings

This year has turned into a challenging one for emerging market investors, as China remains weak (at least relatively so), Brazil and Mexico seem to be turning in the wrong direction, and multiple Southeast Asian markets sell off on macroeconomic worries. Even so, business continues on at Copa Holdings (NYSE:CPA), where a strong and savvy business plan has led this Latin American airline to not only strong margins and good growth, but solid prospects for the coming years.

Please read more here:
http://www.investopedia.com/stock-analysis/090313/great-model-and-growing-markets-powering-copa-holdings-cpa-lfl-gol-luv.aspx

Investopedia: Has Santander Made It Through The Worst?

Like so many other banks in Europe, Santander (NYSE:SAN) has been through the wringer. Its home market of Spain has seen devastating economic decline, and relatively healthier operations in faster-growing areas like Brazil and Mexico haven't made up the difference. The bank's shares have dropped more than 50% over the past five years.

Bad as things have been, investors in the U.S. have seen plenty of examples of how bank stocks can recover significantly once credit costs begin to stabilize and then improve. On one hand, then, is the possibility of a Bank of America (NYSE:BAC) or Citigroup-like (NYSE:C) rise from the ashes. But on the other hand is the truly scary state of affairs in Spain and the risk that Latin America is starting to slow to a significant degree. Although Santander shares may be a little cheap today and would certainly have significant upside if/when the market believes Spain has stabilized (and with it, Santander's credit costs), the risk/reward tradeoff does not seem appealing enough to me when considering the options available to investors in other European and Latin American banking stocks.

Please continue here:
http://www.investopedia.com/stock-analysis/090313/has-santander-made-it-through-worst-san-bbva-bac-itub.aspx

Investopedia: For BBVA, Does More Spain Mean More Pain?

Spain is a bigger mess than most Americans can appreciate, as the 26% unemployment rate in Spain (which was a quarter-over-quarter improvement) is higher than has ever been seen in the U.S., including during the Great Depression. Likewise, major Spanish banks like Santander (NYSE:SAN) and BBVA (Nasdaq:BBVA) continue to see bad credit levels that would be hard to imagine at major U.S. banks.

Still, U.S. banks such as Bank Of America-like (NYSE:BAC) have seen prices spike once credit costs bottom out. While BBVA is unlikely to see a BAC-type return in the next few quarters, BBVA's management of its Spanish business and the quality of its Latin American operations will ultimately lead to improved results and a better valuation.

Read more here:
http://www.investopedia.com/stock-analysis/090313/bbva-does-more-spain-mean-more-pain-bbva-san-itub-bbd.aspx

Friday, August 30, 2013

Seeking Alpha: Mattson Technology: A High-Beta Play On 20nm And Below

Fellow Seeking Alpha contributor Ashraf Eassa and I have both written previously about Ultratech (UTEK), a semiconductor equipment company that we both like for its innovative positions in laser spike annealing (LSA) and advanced packaging lithography ("flip chips"), as well as the potential of its steppers in LED manufacturing. In particular, we have both made the case that advanced annealing technologies are likely to be a critical factor in the move to sub-20nm processes.

Ultratech isn't the only game in town, though, and there are multiple technologies and process steps that are going to play significant roles in the production of FinFETs and 3D circuits. With that, I would take a look at Mattson Technologies (MTSN), as this company has already accomplished the not-so-easy task of gaining meaningful share in the dry strip, rapid thermal processing (RTP), and etch markets despite competing with giants like Lam Research (LRCX), Applied Materials (AMAT), and Tokyo Electron (TOELY.PK).

While 2013 has proven to be a very disappointing year for semiconductor equipment orders (and much like waiting for Godot), I don't believe this stagnation is sustainable. Foundries and chip companies can only delay orders and repurpose older equipment for so long. With that, I believe orders will begin to recover in late 2013/early 2014 and bring Wall Street back to the view that Mattson has the collection of tools and technology to challenge its prior record revenue levels - an achievement that I believe could take the shares to $3 or above.

Please read the full article at Seeking Alpha:
Mattson Technology: A High-Beta Play On 20nm And Below

Investopedia: It's No Accident That Drugs Are Expensive

The cost of prescription drugs is a perennial subject of heated debate, as advocates on one side argue that drug companies make windfall profits and overcharge health care systems and advocates on the other side argue that higher drug prices simply reflect a higher cost of doing business and a need for companies to make a return commensurate with the risks they take on. Although I have no delusions that I'll change the minds of those who believe drugs are too expensive and that drug companies are abusing patients and insurance companies, the impact of rising costs of drug development can't be ignored.

Please follow this link to continue:
http://www.investopedia.com/articles/markets/083013/its-no-accident-drugs-are-expensive.asp

Investopedia: OmniVision Technologies - The Beat(ing) Goes On

I've followed OmniVision Technologies (Nasdaq:OVTI) for quite a while now, but I've never owned the shares. In a nutshell, OmniVision seems to fit into that “it's more trouble than it's worth” category of stocks where severe operational volatility (that I don't believe the company really can or could do much to control) leads to big swings in the price. That may be fine for investors/traders who like active names that produce multiple trading opportunities for buy/sell moves within a year, but it is much less attractive to those of us who pursue an investment path of “enlightened torpor”.

With that, OmniVision's fiscal first quarter (and guidance for the second quarter) was really just more of what I've learned to expect from this company. While I do believe OmniVision has good technology and a solid market position relative to the likes of Sony (NYSE:SNE) and Samsung, it's just such a difficult market to prosper in, particularly with the turbulence in the handset market right now.

Read the full article at Investopedia:
http://www.investopedia.com/stock-analysis/083013/omnivision-technologies-beating-goes-ovti-sne-atml-avgo-brcm-aapl.aspx

Investopedia: Apache Makes Nother Move To Reduce Business Risk

Investors are getting even more of what they say they want from Apache (NYSE:APA), as this large independent oil and gas producer has reached an agreement to sell down its stake in Egypt. Due in no small part to the significant increase in political/operating risk in Egypt, many shareholders and analysts had been vocal in calling for Apache to reduce its exposure to the country. Although it sounds like Apache got a reasonable deal, I am skeptical that it's really going to change opinions on this company as it goes through a restructuring of its operations.

Please read more here:
http://www.investopedia.com/stock-analysis/083013/apache-makes-another-move-reduce-business-risk-apa-snp-oxy-omvky.aspx

Investopedia: Vodafone, Verizon (And AT&T?) Go Once More Unto The Breach

Good ideas have a way of hanging around and figuring out a way to unwind the split ownership of Verizon Wireless is a good idea. With that, Verizon (NYSE:VZ) and Vodafone (NYSE:VOD) are back at work on a way to forge a mutually beneficial arrangement to bring Verizon Wireless fully under the ownership and control of Verizon. If reports of Verizon being more flexible on price and Vodafone being more flexible on deal structure are true, there's a good chance this deal gets done, but I still wouldn't rule out the possibility of AT&T (NYSE:T) having a role to play before it's all said and done.

Please continue here:
http://www.investopedia.com/stock-analysis/083013/vodafone-verizon-and-att-go-once-more-unto-breach-vod-vz-t.aspx

Investopedia: Salesforce.com Shows Some Reacceleration

I seriously doubt anything will ever quell the heated arguments over Salesfore.com (NYSE:CRM), it's future prospects, and its valuation, but the company's fiscal second quarter earnings are likely to give the bulls a little extra ammo for the time being. Salesforce.com remains an expensive stock with questionable operating leverage, but it also remains a share gainer in a large market. Moreover, while stocks like Salesforce.com and Workday (Nasdaq: WDAY) aren't my cup of tea at all as an investor, I know better than to play chicken with a freight train.

Please follow the link below to continue:
http://www.investopedia.com/stock-analysis/083013/salesforcecom-shows-some-reacceleration-crm-wday-ibm-orcl.aspx

Now on Twitter

Finally broke down and joined Twitter (@ Kratisto_Invest). No idea how active I will be, but we'll see what happens...

Thursday, August 29, 2013

Seeking Alpha: Utah Medical Has Appealing Quality, But Needs Growth

I love sifting through micro-caps in the hunt for under-followed companies that have a lot to offer to patient investors. Unfortunately, I think I'm late to the party with Utah Medical (UTMD) as although this company is not followed by the sell-side, the shares are up more than 50% over the past year and nearly 100% over the past two years.

Utah Medical has a long history of excellent margins and free cash flow generation (better, even, that established giants like Bard (BCR) and Medtronic (MDT)), but not a lot in the way of revenue growth. While an acquisition a little while ago gave the company a great growth product, it looks like management needs to consider going back to the M&A well to take this business to another level.

Please read more here:
Utah Medical Has Appealing Quality, But Needs Growth

Seeking Alpha: Looking At AVEO With Fresh Eyes

It's been a horrible year for AVEO Pharmaceuticals (AVEO), and arguably a lot of the damage has been self-inflicted. Others have written at length about the FDA's decision to reject the company's application for tivozanib in renal cell carcinoma(RCC), as well as the deficiencies in the design of the pivotal trial, the company's apparent tone-deafness towards the FDA, and the lack of disclosure to shareholders regarding interactions with the agency.

I'm not here to rehash all of that. For better or worse, tivozanib is effectively dead in RCC for the time being. What I am interested in doing, though, is trying to approach the company with as close to a clean slate and fresh eyes as I can. After all, tivozanib is still in two other Phase II studies and AVEO could certainly follow in the tracks of other biotechs who faced crushing rejections only to come back later with approvable drugs or indications.

Please read the full article here:
Looking At AVEO With Fresh Eyes

Investopedia: Can LEDs Brighten Investor Portfolios?

Goldman Sachs recently highlighted LED lighting as a top “disruptive” theme over the next decade. While I'm often inclined to believe that these sell-side "theme pieces" are designed more towards generating attention during stretches of slow company news, I have little doubt that the penetration rate of LEDs in the lighting market is going to increase significantly over the next decade. That is going to fuel significant demand for LED-making equipment, LED packaging, and finished lighting fixtures for companies like Aixtron (Nasdaq:AIXG), Cree (Nasdaq:CREE), Philips (NYSE:PHG), and Osram What is less clear to me is the extent to which investors can expect to see huge gains at this point – the “LED revolution” has been long in coming and while there are certainly going to be trading opportunities come and go, the idea of “buy and hold” in this sector seems optimistic at best.

Please read the full article here:
http://www.investopedia.com/stock-analysis/082913/can-leds-brighten-investor-portfolios-cree-aixg-ge-phg.aspx

Investopedia: Pall Always Gets The Benefit Of The Doubt

I'd hate to be short Pall (NYSE:PLL), as large companies in the filtration space often seem as close to bulletproof as you can find in the market. So even though sell-side analysts chronically overestimate Pall's free cash flow, investors remain happy with a company that admittedly enjoys strong share and a very lucrative channel of repeat business. While I think Pall's shares remain overvalued, I don't have any particular reason to believe that the shares will sell off dramatically, as the life sciences business should be stable and the industrial business should start improving next year.

Please read more here:
http://www.investopedia.com/stock-analysis/082913/pall-always-gets-benefit-doubt-pll-dci-entg-iex.aspx

Investopedia: The Fresh Market Can't Put Margin Worries To Bed

As I wrote a quarter ago, The Fresh Market (NYSE:TFM) is a highly-valued growth stock in the food retail space, and one where the company is starting to see some real pushback from the market as to the company's margin structure and competitiveness. I didn't expect all of the concerns to get resolved in one quarter, but the company's willingness to increase promotions and accelerate store builds seems to be exactly what the Street does not want to hear right now. As I suspect there's a good chance of these shares getting even cheaper, investors may want to keep on eye on this name as a growth stock increasingly trading at a reasonable valuation.

Read more here:
http://www.investopedia.com/stock-analysis/082913/fresh-market-cant-put-margin-worries-bed-tfm-wfm-wmt-ngvc.aspx

Investopedia: Campbell Soup Doesn't Seem To Be Prioritizing The Right Things

It's hard to run too hot or cold on Campbell Soup (NYSE:CPB). It has typically been a pretty conservatively-run company and many of its brands are virtually iconic. That said, management has been making some unusual decisions of late – promotional spend has seemed erratic, the company does not appear to be supporting Pepperidge Farms enough, and acquisitions of organic baby food and retail carrots are head-scratchers. Campbell Soup isn't unusual in being a somewhat expensive-looking packaged food stock, but this isn't a stock I'd pay up to own.

Please follow this link for more:
http://www.investopedia.com/stock-analysis/082913/campbell-soup-doesnt-seem-be-prioritizing-right-things-cpb-mdlz-k-nsrgy.aspx

Investopedia: Guess May Be Getting Its House In Order

Apparel and accessory designer and retailer Guess? (NYSE:GES) has been on a wild ride for the past couple of years as weakness in North American merchandising and operating performance, not to mention macroeonomic weakness in Europe, squared off with lucrative licensing income and the growth potential of an ongoing expansion into Asia. While Guess shares look set to jump on very encouraging fiscal second quarter earnings, the level of competition in apparel retailing in North America, Europe, and Asia makes it difficult to have a lot of confidence in the long-term outlook.

Please continue here:
http://www.investopedia.com/stock-analysis/082913/guess-may-be-getting-its-house-order-ges-aeo-gps-anf.aspx

Wednesday, August 28, 2013

Seeking Alpha: Accuray Continues To Turn It Around

As the distant #3 in the radiation oncology market, Accuray (ARAY) already has a tough row to hoe and past issues with product reliability and present-day concerns about the cost effectiveness of its systems don't help matters. Even so, it looks like the new CyberKnife M6 and Tomo H products, coupled with operating cost improvements, are giving this company another chance at making a real go of it. The stock's nearly 20% jump since my last update has certainly taken some urgency out of the relative value call, but the pace of order improvements and the extent of skepticism about the company still offer arguments for a long position.

Please follow this link to read more:
Accuray Continues To Turn It Around

Seeking Alpha: Digital Cinema A Tricky Mix Of Opportunity, Risks, And Uncertainty


Once you've been active in the markets for a while, you'll notice that certain business models are used over and over again. One of the more common ones is the roll-up model where a company executes multiple M&A acquisition transactions (typically of much smaller companies) to consolidate a market and achieve meaningful benefits of scale. Provided that the multiples paid stay under control (particularly relative to the cost of capital) and management doesn't lose sight of expenses, this strategy can produce some pretty significant growth.

That brings me to Digital Cinema Destinations (DCIN) - a small, but growing, operator of all-digital movie theaters. On one hand, I really like the company's strategy of acquiring small independents and trying to boost full-week revenue through alternative programming. On the flip side, I'm concerned about how much capital the company will need to reach its goals, the compensation promised to the CEO, and the absence (so far, at least) of any institutional investors on my short list of savvy micro-cap investors. I do think these shares are undervalued and waiting for these risks to abate could lead to surrendering a lot of upside, but this is definitely only a stock for "consenting adults."

Please read more here: 
Digital Cinema A Tricky Mix Of Opportunity, Risks, And Uncertainty

Seeking Alpha: Cyan Looks To Bring The Green

Talking about increasing carrier network traffic may border on the cliché at this point, but it's a real problem for network operators. If Cisco's (CSCO) prior estimates of compound annual traffic growth of 23% between 2012 and 2017 are even close to accurate, carriers badly need new strategies for coping with traffic growth, as boosting capex by 23% a year for five years isn't much of an option.

This is where Cyan (CYNI) comes into the picture. Cyan is unproven (less than $100 million in revenue), but the company has two separate approaches to help carriers meet their network needs - packet-optical transport systems that can help manage traffic at the metro edge and reduce the need for expensive routers, and a purpose-built SDN solution for carriers that offers the promise of more efficient network utilization.

Cyan is going up against numerous well-established equipment vendors and alternative approaches to managing network traffic. What's more, I have some concerns that the company's position in carrier SDN isn't as unique as hoped. Even so, I believe there is an argument to be made that Cyan shares are trading meaningfully below fair value. While this is a company/stock with above-average risks, a fair value in the range of $12.00 seems reasonable and that range could expand well into the high teens.

Please read the full Seeking Alpha article here:
Cyan Looks To Bring The Green

Investopedia: Vertex Building A Fortress In Cystic Fibrosis

It's not too often that you see a biotech company establish a truly differentiated product portfolio with multi-billion dollar potential and minimal competition, but Vertex (Nasdaq:VRTX) seems to be doing exactly that. This one-time specialist in virology is already well on the way to more than $5 billion in potential revenue, and could ultimately see nearly double that amount if clinical trials go the right way. This may ultimately put the company in the “nice problem to have” category of figuring out how to reinvest the proceeds and determining whether or not further investments in the hepatitis C program are worthwhile.

Please continue here:
http://www.investopedia.com/stock-analysis/082813/vertex-building-fortress-cystic-fibrosis-vrtx-gild-gsk-bmy.aspx

Investopedia: Winter Still Coming For Joy Global

Cyclical industries have a habit of answering the question “How much worse/better can things get?” in pretty dramatic fashion. With mining companies slashing capex budgets left and right, winter is definitely coming for leading mining equipment company Joy Global (NYSE:JOY). While management's success in streamlining operations, improving manufacturing yield, and reducing fixed costs should keep the company's head attached firmly to its body, there's a risk to shareholders that the market hasn't fully digested what weak orders today will mean for tomorrow's revenue. So although I believe Joy Global is undervalued on a long-term basis, investors buying or holding today have to be able to tolerate the thought that the shares could have further to fall before stabilizing.

Please follow this link for the full article:
http://www.investopedia.com/stock-analysis/082813/winter-still-coming-joy-global-joy-cat-kmtuy-cfx.aspx

Investopedia: Workday Surfing The SaaS Wave

Emerging ERP vendor Workday (Nasdaq:WDAY) is one of the most expensive names in the software space today, as investors are seemingly happy to pay huge multiples for shares in a company that many believe can seriously challenge large incumbents like Oracle (Nasdaq:ORCL), SAP (NYSE:SAP), and Microsoft (Nasdaq:MSFT). So long as the company can continue to deliver growth ahead of demand expectations, the party will most likely continue and it won't surprise if Workday's shares hit three digits at some point in 2013. That said, this is a story where valuation leaves no margin for error, so investors should understand what they're getting into before buying shares.

Please continue here:
http://www.investopedia.com/stock-analysis/082813/workday-surfing-saas-wave-wday-orcl-sap-msft.aspx

Investopedia: Another Beat And Raise Highlights Avago's Quality

One of the more common questions I get is “If you like 'X' so much, why don't you own it?” Sometimes the answer comes down to not wanting to sell stocks to raise cash, and sometimes it's a question of timing or portfolio allocation. In the case of Avago (Nasdaq:AVGO), a semiconductor stock I've liked for a little while now, it's a little bit of “all of the above”. In particular, though, the general malaise in anything tied to wireless had me cautious, as well as the company's high reliance on China for industrial segment growth.

As it turns out, I needn't have worried. Avago delivered another beat-and-raise quarter, which I argue once again highlights that the company's chips offer pretty compelling advantages that allow for market share gains even amidst challenging end-market conditions. Writing this in the pre-market hours, I don't know if the indicated gains will hold in the market, but while the stock is not the cheapest name around anymore, I think there's enough momentum and quality to the name to lean towards “benefit of the doubt” on value.

Please follow this link for more:
http://www.investopedia.com/stock-analysis/082813/another-beat-and-raise-highlights-avagos-quality-avgo-brcm-tqnt-csco.aspx

Tuesday, August 27, 2013

Seeking Alpha: Approval In Peyronie's Only Part Of The Auxilium Story

With the FDA's decision date on the approval of Xiaflex for the treatment of Peyronie's disease looming (September 6), considerable attention has come to Auxilium Pharmaceuticals (AUXL) in recent weeks. While the FDA's decision is absolutely a significant event for the company, investors shouldn't overlook the company's challenges in its existing specialty pharmaceuticals business, as well as the efforts that will have to go into making Xiaflex a winner in Peyronie's assuming approval.

Read more here:
Approval In Peyronie's Only Part Of The Auxilium Story

Seeking Alpha: IPG Photonics Looking To Innovation And Integration

It's still pretty tough out there if you're in the laser business. While Newport (NEWP) and II-VI (IIVI) have come alive in the last three months and Coherent (COHR) and Rofin-Sinar (RSTI) are both in the green for the full year, only Newport has kept pace with the S&P 500. Even so, IPG Photonics (IPGP) has done even worse, as wobbly quarterly performance and weak end markets like industrial welding and automotive have discouraged investors in this volatile laser company.

Still, I think there are better days ahead for this leading fiber laser company. Fiber lasers continue to gain share in the growing laser market, and the number of applications for fiber lasers has only been increasing. Not only does IPG Photonics enjoy a strong IP position and a good reputation for innovation, but the company's vertical integration allows it to produce lasers at considerably lower costs than its rivals - leaving the company free to compete on features when it can, and price when it must.

On a cash flow basis, I believe these shares are about 25% undervalued today, and I do expect rather aggressive adoption and growth for the company over the next five and ten years. EV/EBITDA also supports the notion that these shares are undervalued, and though global industrial capex spending remains a major unknown, I believe the success of IPG Photonics is more weighted toward "when" than "if".

Please go to Seeking Alpha for the full article:
IPG Photonics Looking To Innovation And Integration

Seeking Alpha: Esprit Holdings Already Priced For A Very Uncertain Recovery

Readers with a little gray at the temples may fondly remember back to a time when Esprit was a popular, or at least relevant, apparel brand in the U.S. A lot has changed since then, and Esprit Holdings (NASDAQ: ESPGY.PK) is now a global wholesale and retail apparel brand with a major presence in Europe and the hope of riding China's middle class to another era of growth. Unfortunately, Esprit has been in a five-year tailspin that has seen serious revenue, margin, and cash flow erosion, as well as the rise of numerous very competitive global retailing concepts. While there is a major discrepancy between the sell-side and buy-side of the Street regarding Esprit's future prospects, it's difficult to make the case that there's enough value here to speculate on a recovery.

Please continue here:
Esprit Holdings Already Priced For A Very Uncertain Recovery

Investopedia: Has The Street Finally Overshot Brown Shoe?

It can take a few quarters for Wall Street to dial in its expectations when a company has started out/underperforming, and that's particularly true in cases of turnarounds. Brown Shoe (NYSE:BWS) enjoyed a good two-year run in the market as the company's turnaround/restructuring efforts paid off and as the company's outperformance reset the bar for expectations. While the company's second quarter results and guidance weren't bad as such, they would suggest that maybe the Street has finally caught up to the story and the momentum angle of outperforming expectations is no longer in play.

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http://www.investopedia.com/stock-analysis/082713/has-street-finally-overshot-brown-shoe-bws-dsw-shoo-rost.aspx

Investopedia: Tiffany Continues To Execute At A Higher Level

As premier jewelery retailer Tiffany (NYSE:TIF) continues to beat expectations, it's getting harder to argue that the Street overvalues the company's brand and future cash flows. Not only is the company outperforming in difficult markets like Europe, but efforts to improve operating performance seem to already be delivering results. Factor in an eventual improvement in the Americas and future growth in businesses like watches, and I can understand why Tiffany is a popular pick. I'm personally not willing to chase Tiffany up at these levels (particularly when it seems like 20% to 30% pullbacks are routine), but it's hard to argue with a company that is performing at a pretty high level despite what should be a tough global environment.

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Investopedia: Akorn Scores A Rare Win-Win Acquisition

The world of generics and specialty pharmaceuticals includes many companies that fly below the radar of most investors, but Akorn (Nasdaq:AKRX) may be worth the time it takes to know it better. Not only is Akorn a leading player in generic ophthalmology drugs, but the company's acquisition of Hi-Tech Pharmacal (Nasdaq:HITK) looks like an all-too-rare case where both parties in the deal come out ahead.

Investors who took my advice regarding Hi-Tech a year ago are sitting on gains of nearly 50% (though the intervening 14 months was not smooth), but I'm not sure I'd rush to reinvest the proceeds into Akorn. Although I do like Akron and I believe this deal strengthens the company, the valuation there doesn't leave a lot of upside unless Akorn can drive even better synergies than its guidance suggests.

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http://www.investopedia.com/stock-analysis/082713/akorn-scores-rare-winwin-acquisition-akrx-hitk-teva-jnj.aspx

Investopedia: The Market Already Convinced Colfax Will Meet Or Beat Its Goals

It's an underappreciated fact of investing in industrial companies, but margin performance goes a long way toward explaining stock performance. With the market basically sold on the ability of Colfax (NYSE:CFX) management to turn around the ESAB welding business (now part of Fabrication Technology), the shares have done well this year and sit just below a 52-week high despite ongoing wobbles in industrial orders and soft welding demand. Although I don't doubt management's ability to drive better-than-expected margins, it's getting harder to justify the stock's premium.

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Monday, August 26, 2013

Investopedia: Yet Another Failure Has Rigel Pharmaceuticals Almost Back To Square One

The news from long-suffering biotech Rigel Pharmaceuticals (Nasdaq:RIGL) just continues to get worse. Rigel has already seen AstraZeneca (NYSE: AZN) return the rights to R788, its Syk kinase inhibitor for rheumatoid arthritis, and with Monday's announcement of the failure of R343 in allergic asthma, it's worth asking whether there's any real value left in the company's Syk inhibitor program. Although the company still has a couple of clinical trials ongoing, as well as $250 million in cash, these shares are looking more and more like a spin of the roulette wheel than any sort of real investment opportunity.

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Investopedia: AstraZeneca Goes Back To The M&A Well Yet Again

AstraZeneca (NYSE:AZN) CEO Pascal Soriot is pulling out all the stops, and repeatedly pulling out the checkbook, to rebuild the future prospects of this lagging Big Pharma company. Having spent nearly $1 billion on Omthera and Pearl Therapeutics earlier this year, AstraZeneca has announced yet another deal – this time a potentially $500 million deal for an early-stage company in the hot oncology immunotherapy space.

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http://www.investopedia.com/stock-analysis/082613/astrazeneca-goes-back-ma-well-yet-again-azn-bmy-mrk-rhhby.aspx

Investopedia: Is Improving IT Demand Enough To Maintain Teradata's Rebound?

The rise and fall of Teradata (NYSE:TDC) over the past two years is a good lesson in the pitfalls of theme investing in tech. Teradata enjoyed a great run on the back of “Big Data” hype and shares of this data analytics company definitely overshot fair value. Once IT budgets came under pressure, though, Teradata's reported results showed just how sensitive the company remains to on-the-ground IT demand. While the shares have bounced off their 52-week lows and the company is a credible player in an important market (the collection and analysis of enterprise data), it's hard to call this stock a bargain today.

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Investopedia: Amgen Sweetens The Bid And Secures Onyx

As it turns out, Amgen (Nasdaq:AMGN) didn't have to stretch too far to seal the deal for oncology biotech company Onyx Pharmaceuticals (Nasdaq:ONXX). While Amgen's initial bid of $120 per Onyx share set off a nearly two-month auction process, in the end it took only an extra $5 per share to complete the deal as there was apparently only passing interest from other Big Pharma players to pay up for Onyx's portfolio of oncology drugs. All in all, while it's a worthwhile deal that helps patch over some near-term growth concerns for Amgen, it's unlikely to be a transformative deal.

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Friday, August 23, 2013

Investopedia: Yahoo! Reclaims Traffic Leadership, But Can It Turn It Into Cash?

A curious thing happened in internet-land in July. According to comScore, Yahoo! (Nasdaq:YHOO) surpassed Google (Nasdaq:GOOG) to take the top spot in web traffic for July 2013, the first time in more than two years. Yahoo! edged out Google with 197 million unique visitors against Google's 192 million. As always, though, the devil is in the details. It remains to be seen whether Yahoo! can leverage its position into revenue and profits.

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http://www.investopedia.com/stock-analysis/082313/yahoo-reclaims-traffic-leadership-can-it-turn-it-cash-yhoo-goog-fb-aol-msft.aspx

Investopedia: Aruba Networks Dig In For The Long War

When Cisco (Nasdaq:CSCO) decides that your particular market is an important one to its long-term goals, you're in for some challenging times (unless you're one of the companies that Cisco chooses to acquire). That's the reality that Aruba Networks (Nasdaq:ARUN) is facing right now, and it has consequences for the bottom line. While I continue to believe that Aruba has the technology and product quality to be a strong #2 in the growing WLAN market, the need to spend more on marketing and sacrifice margins to shore up growth adds another headwind for the stock.

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http://www.investopedia.com/stock-analysis/082313/aruba-networks-digs-long-war-arun-csco-rkus-meru.aspx

Investopedia: Pandora Progressing, But Still Tinkering

Like most growth stories, Pandora (NYSE:P) is a work in progress. While that can sometimes make it appear that management doesn't really know its market or have a solid plan, I believe changes to policies like the listening cap have more to do with the ongoing evolution of ad revenue and user monetization. With Pandora continuing to grow its users, hours, and ad revenue at rates well above the market, I continue to believe this is an exciting, albeit volatile, growth story.

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http://www.investopedia.com/stock-analysis/082313/pandora-progressing-still-tinkering-p-aapl.aspx

Investopedia: Marvell - Unicorn Of The Chip Space?

Reading sell-side research on Marvell (Nasdaq:MRVL), you might come away not thinking too highly of the company or its decisions to grow the business in areas like Chinese mobile and wireless. On the other hand, look at the company's actual market share gains, financial performance, and the market's opinion on the company and you come away with a much different opinion. So far, the bulls in that argument are winning the day, as Marvell has been outperforming names like Qualcomm (Nasdaq:QCOM), Broadcom (Nasdaq:BRCM), and Nvidia (Nasdaq:NVDA).

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Investopedia: Autodesk A Little Undervalued, But Uncertainty Is Rising

It's interesting to see which excuses the Street willingly accepts when a company is struggling with guidance. In the case of Autodesk (Nasdaq:ADSK), the Street isn't too bothered by another round of lower guidance and ongoing economic uncertainties. Instead, investors seem excited about the potential of a more pronounced transition to a SaaS model. Although I think the Street may be a little too optimistic on that point, the shares do look a little undervalued and remain a volatile software play leveraged to improving economic activity.

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Investopedia: Microsoft Critics Get Their Way, As Ballmer Announces Impending Retirement

In all the time I've written on Microsoft (Nasdaq:MSFT) it seems like readers/investors always came together on at least one topic – they really didn't like CEO Steve Ballmer. While I think Ballmer has often gotten a bad rap and that Microsoft is better-positioned in enterprise software and services than commonly believed, trying to make that case is tantamount to spitting into the wind.

Under Ballmer's leadership, Microsoft has lost close to half of its value. Again, I think you could argue that almost anybody taking the job was going to preside over a significant erosion in market cap, as Ballmer took the CEO position of Microsoft just three months before the tech bubble peaked. In any case, I will side with the critics who feel that, whatever the quality of Ballmer's vision for Microsoft, he did a poor job of selling the Street on it.

Now they won't have Ballmer to kick around much longer. On Friday morning, Ballmer announced his intention to retire from the job within 12 months, with the exact timing tied to the search committee finding a new CEO for the company.

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http://www.investopedia.com/stock-analysis/082313/microsoft-critics-get-their-way-ballmer-announces-impending-retirement-msft-ibm-orcl-goog.aspx